Traditional role of the mountain dulcimer.
General mountain dulcimer or music discussions
In my opinion, the best (meaning accurate and short) history of the dulcimer is the piece written by Dr. Lucy Long and available at the Bear Meadow website: https://www.bearmeadow.com/smi/histof.htm . Most of us know this story by now. Dr. Long explains what @robin-thompson notes, the variety of playing styles that characterized the dulcimer from its origins:
The traditional repertoire of the dulcimer included the full range of repertoires found in the mountains, including traditional British balladry and hymnody, dance tunes, and play/party songs [ . . .] Because of its soft volume, the dulcimer is thought to have been used either as accompaniment to singing or for instrumental solos, but it was also used in string bands and instrumental duets where it functioned as a melody instrument and also provided harmony and a rhythmic background through the slapping of the pick against the strings.
And @nate's point about innovation characterizing the dulcimer from its very origin is spot on. Both the construction of the instrument and its use was still evolving in the early 20th century when, as @ken-longfield explains, it emerged from isolated Appalachian communities and gained some degree of commercial exposure. At that time, interestingly, it was already being romanticized as an "old" instrument associated with an imagined Anglo-American past, even though the instrument was very new and was still evolving.